To include more than one recipient, please separate each email address with a semi-colon
';', to a maximum of
5

Recipient email(s):

Recipient name(s):

Email yourself a copy?

Enter the code:

By submitting this article to a friend we reserve the right to contact them regarding AMM subscriptions. Please ensure you have their consent before giving us their details.

US mining optimism

Keywords:

A combination of rising commodity prices and easing of regulations to speed up the permitting process for new projects could result in more US metals mining production, although it is likely be a gradual. Concerns continue about the quantities of metals and other minerals  especially critical minerals  that are being imported as opposed to being mined domestically.

In what is seen as a leading indicator of the optimism that lies ahead, metals exploration spending began to rebound last year, says Hal Quinn, chief executive officer of the National Mining Association. He notes that he is expecting 2018 to be an even a more positive year for the US mining industry, helped along by very sound and enabling governmental policies, such as lower tax rates with the recently passed tax reform legislation.

Long-term investmentOf course recent increases in commodity prices are helping. I believe it is a case of rising prices lifting all ships, John Mothersole, director of research for IHS Markits pricing and purchasing service maintains, noting that while there still has not been a significant pick-up yet in US hard rock metal mining, the environment is much more favorable now than it has been in a number of years.

While higher commodity prices clearly make it more attractive for companies to invest in new mines in the United States, Nigel Steward, director of Rio Tintos copper and diamonds operations, says it is important for mining companies to finance their growth even through the dips in the cycle. This is something that Rio Tinto has been successful in doing, he says, noting that in addition to investing $476 million over the past three years to extend the mine life of its Kennecott copper mine in Utah, it has also spent over $1 billion over the past ten years on its Resolution copper mine project, which is expected to complete its permitting process by 2020.

We were one of the few companies that continued to conduct exploration activities in the United States, even during the dip in the commodities cycle, Steward points out.

Tom Brady, chief economist for Denver-based Newmont Mining Corp, notes that mining companies were highly criticized in the 2008-12 timeframe when there were widespread moves to grow US and global mining production just for growths sake. But he says that type of spending began to be drastically reduced in 2013 and remains at a relatively low level. He says that with that runaway spending still fresh in the markets mind, mining companies are more likely to make incremental investments versus those in large, multi-billion-dollar greenfield projects.

He says that such incremental loosening of the investment belt will probably take the form of joint ventures, incremental capital investments to increase the life of existing operations, or the addition of smaller projects to mine portfolios. Also many of those investments will be focused upon ways to make existing assets more efficient and more profitable. That, he says, also includes great focus upon input costs.

Strategic mineralsAnother factor affecting mining investment plans is the fact that the US is more dependent upon international sources for a wide range of strategic or critical minerals. In his testimony before the US House of Representatives natural resources subcommittee on energy and minerals on December 12 last year, Murray Hitzman, associate director for energy and minerals for the US Geological Survey, said that while the US remains a major minerals producer, in 2016 it was 100% reliant upon imports for 20 strategic non-fuel mineral commodities; up from only eight in 1954.

He said the US is also more than 50% dependent upon imports for another 30 commodities and highly dependent on imports for certain others. For example, Rio Tintos Steward says that currently about a third of the copper consumed in the US comes from outside the country.

RestartsThere could be some more restarts of previously idled mines. Nyrstars Middle Tennessee zinc mines were restarted in the second quarter of 2017. Mothersole says that it is possible that other miners might increase production as a result of significantly higher prices, such as Freeport McMoRan at its copper operations in the US Southwest.

There are mixed opinions about how much commodity prices and governmental policies, including cuts to tax rates, are likely to contribute to increased production. While higher commodity prices seem to be attracting companies to open new mines, Steward reminds that their impact on restarting shuttered capacity also depends on costs as they are not necessarily the most economical mines: That is why they were closed in the first place.

Brady says that the lower tax rate from the recently passed tax-reform legislation could make some previously marginal projects more profitable. Steward says that mining companies are cautious, concerned that the tax bill will not necessarily have a long-term impact, especially given the time it takes for mining projects to get up and running: Administrations change. Tax policies could change as well.

New policiesQuinn says that generally there is increased optimism in light of the new policy landscape in the US. Weve already seen six executive orders addressing certain core areas of concerns for mining companies, including one executive order specifically aimed at metals and other minerals, pushing for the development of proactive policies that could strengthen the US minerals sector and streamlining and reducing delays in the mining permitting process. He notes that the US mine permitting process generally takes seven to ten years, while it only takes two to three years in countries like Canada and Australia even though the environmental standards there are very similar to those in the US.

Steward says that it is very important for the US mine permitting process to be accelerated. We arent looking for shortcuts. We respect the need for all the stakeholder processes to take place. But we are looking for ways that all of the permitting deadlines could me met on time so that mining projects could progress according to our plans, he explains.

When you are investing billions of dollars in a new mine, you want to have certainty, Steward says, noting that is why a lot of mining companies have moved away from investing in new projects in the US. They are moving away from the US because other jurisdictions are providing them with greater certainty regarding permitting and taxation.

He says he believes that the Trump administration is listening to the concerns of US mining companies and is responding.

By: Myra Pinkham

Have your say

All comments are subject to editorial review.
All fields are compulsory.